The Downsizing of American Foreign Policy

August 10, 2010

In the wake of the financial meltdown triggered by the collapse of the investment bank Lehman Brothers on September 15, 2008, and the deep global recession that the Lehman collapse dramatically worsened, the American financial sector is shrinking. Something similar is about to happen to American foreign policy, and partly for the same reason. Just as the recession and the new financial regulations will deprive banks and similar institutions of some of the resources they controlled before September 15, 2008, so the scope of America’s international activities will contract in the years ahead because the American government will have far less money with which to conduct the nation’s foreign policy.

Because that foreign policy underwrites global stability and prosperity, the contraction of American power will adversely affect countries everywhere, even those that complain about the way the United States uses its power. The world will learn in the years ahead that one thing worse than an America that is too strong is an America that is too weak. Why the United States will be able to do less in the world, and just what it will and will not be able to do in the second decade of the twenty-first century and beyond, are the subjects of my new book, The Frugal Superpower: America’s Global Leadership in a Cash-Strapped Era.

The United States will have far less to spend on foreign policy because it will have to spend far more on other things. It has a large and growing national debt, which the measures designed to cope with the financial crisis and the deep recession that it worsened have substantially increased. Moreover, the costs of the country’s principal entitlement programs, Social Security and Medicare, will soar in the decades ahead as the 75 million baby boomers–Americans born between 1946 and 1964–begin to retire and collect the benefits they have been promised.

The American government will not be able to borrow all the money it will need to pay the growing interest on the national debt and its obligations to the swelling ranks of the nation’s senior citizens. It will have to raise taxes and reduce spending, including spending on entitlements. In an era in which fewer resources will be available for everything, it is certain that fewer will be available for foreign policy. When working Americans are paying more than in the past to support their fellow citizens who have retired, and retirees are receiving fewer benefits from the government than they were promised, neither group will be eager to offer generous support to overseas ventures. This change in attitude will change the domestic basis of American foreign policy.

In foreign policymaking, the American public is divided into two groups. A small one follows international issues closely, writes about them in the media, and, when its members serve as government officials, they carry out the foreign policy of the United States. The much larger majority of the population has far less information, interest, and influence. This does not mean, however, that the American government can do anything it wants in foreign policy.

It has to operate within limits that arise from a consensus in the wider public about what is desirable and what is feasible. During the Cold War, for example, America maintained a large and costly military presence in Europe because this was widely agreed to be necessary to protect American interests by deterring a Soviet attack. The limits that govern foreign policy are not formally encoded in a foreign policy charter and are seldom even set out explicitly. They are more like customs in small-scale societies or good manners in larger ones: they are tacitly, but broadly, understood.

Because of the country’s financial constraints, those limits will be narrower than they have been for many decades. The government will still have an allowance to spend on foreign affairs, but because competing costs will rise so sharply that allowance will be smaller than in the past. Moreover, the limits to foreign policy will be drawn less on the basis of what the world needs and more by considering what the United States can–and cannot–afford.

In these circumstances, the public will no longer feel able to afford, and so will not support, operations to rescue people oppressed by their own governments and to build the structures of governance where none exists. Interventions of this kind, which the United States has undertaken in the last two decades in Somalia, Haiti, Bosnia, Afghanistan, and Iraq, will not be repeated. The American defense budget will come under pressure, and so, too, therefore, will the missions that the defense budget supports: the American military presence in Europe, East Asia, and the Middle East.

Here the impact of the coming economic constraints on foreign policy will differ from the effects of the downsizing of the financial industry. Reducing the size of banks and other financial institutions will have benign consequences, reducing the risk of a major economic collapse, limiting economically unproductive speculation, and diverting talented people to other, more useful, work. By contrast, the contraction of the scope of American foreign policy will have the opposite effect because the American international role is vital for global peace and prosperity. The American military presence around the world helps to support the global economy. American military deployments in Europe and East Asia help to keep order in regions populated by countries that are economically important and militarily powerful. The armed forces of the United States are crucial in checking the ambition of the radical government of Iran to dominate the oil-rich Middle East. For these reasons, the retreat of the United States risks making the world poorer and less secure, which means that the consequences of the economically-induced contraction of American foreign policy are all too likely to be anything but benign.